Filing taxes is all about taking the numbers off various forms and plugging them into the right places. Two forms that you’ll hear referenced are form W-2 and form 1099. What’s the difference between these two forms and the type of work (or earned income) that they describe? There are a lot of differences, and each of them impacts your taxes in a major way. Here’s what you need to know.
What does it mean to be a W-2 employee?
If you are an employee of a company, and that company paid taxes on your behalf (income, Social Security, and Medicare taxes, for example), you will receive a W-2 for the year prior, generally during the month of January. It’ll show how much you were paid and the taxes taken out for various purposes.
With the rise of different kinds of gig work, there’s a lot of debate over what constitutes a W-2 employee versus a contractor. For example, if you work for a ride-hailing company like Uber, you’ll generally be paid as a contractor, in spite of the fact that Uber tells you when and where to pick up a customer as part of your work. Technically, you can refuse an assignment and keep your job, but it will impact future work you’re given. Stay tuned to see how these issues are legislated going forward – and it will likely vary from state to state.